Excellent ideas, and very interesting comments here !!

I would say that I like the possibility of a quite vertical and chaotic underground city. After all (especially in mountains for dwarves...), it should follow the most friable rocks and that water might have already digged. Connected to underwater (flowing or not), that makes sense.

Geothermy is a great resource here, I think. It may aid to develop the growing of plants and fungi (therefore the presence of animals to hunt or use). We know that it could actually replace light if the minerals are numerous and in good proportion. Plus, a constant temperature is a blessing for an active biologic life (harvests are not limited by seasonal effects, cold-blooded animal are always active). It could direct the activities of the city, since the more you get down, the hotter it is.

And I had other remarks, but just forgotten it (I'm a bit looking for my words...). Anyway, excellent thread!